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Ladies and gentlemen, welcome to MHP SE Q3 and 9 Months 2018 Financial Results Webcast. I now hand over to Anastasiya Sobotyuk, Director of Investor Relations; and Viktoria Kapelyushnaya, Executive Director, Chief Financial Officer. Madams, please go ahead.
Thank you very much. Good afternoon, and good morning. Thank you for joining us today for MHP's conference call dedicated to MHP's financial results for the third quarter and 9 months of 2018.Some of the things we will discuss today are forward-looking statements. So please take it into consideration. I encourage you to use today's press release with our financial statement for the detailed information.On today's call, we have CFO of MHP, Viktoria Kapelyushnaya, she will present financial results of the company in general and by segment; and myself, Anastasiya Sobotyuk, Director of Investor Relations. I will lead you through the presentation.After the presentation, we will be glad to answer your questions. I hope that everybody is ready so we can start our call now.Let's go on to Slide #4 of your presentation. We'll start from the macro environment, during the [ first ] 9 months of 2018. Macro conditions in Ukraine noticeably improved with the real GDP growth expected to accelerate to 3.4% in 2018. This is according to NBU. During 9 months of 2018, currency ratio remained relatively stable, with around only 5% devaluation year-over-year. Inflation decelerated to around 9% year-on-year, driven mainly by food product decrease. Several words about harvest in Ukraine. In 2018, harvest in Ukraine constituted around 65 million tonnes of grain, with average yield of 4.6 tonnes per hectare versus 4.1 tonnes per hectare in 2017. But, of course, as you understand, we are talking about preliminary forecast.The increasing yield happened because of the strong harvest of corn, of course, of which -- actually of the total harvest, Ukraine is planned to export approximately 60%.MHP's results in Grain Growing operations are strong and above our expectations and resulted in over 2.6 million tonnes of crops with yields higher than Ukraine's average.Coming back to the financial results. So let's go on Slide #6 and have a look at key financials for the reporting period. So first 9 months of the year demonstrated sound financial performance, driven by an increase in poultry volumes; strong harvest of crops; growing poultry export and price. MHP generated revenue of USD 1,136,000,000, which is 17% higher year-on-year. Of the total revenue, USD 660 million were received from exports, and it is higher 18% year-on-year. And it constituted 58% of the total revenue.EBITDA constituted USD 362 million, stable year-on-year, with EBITDA margin of 32%. Net profit was USD 142 million, down 44% compared to USD 251 million for 9 months of 2017, but that mainly happened due to the reduction in government grants income since the beginning of 2018, which was USD 41 million in 9 months of 2017 and one-off transaction cost, which is USD 33 million related to new Eurobond issue in April 2018, as well as a noncash foreign exchange translation loss, mainly in Q3 2018.And now I pass the word to Viktoria. She will comment our financial results of the period in greater details and of course, by segment.
Thank you, Anastasiya. Good afternoon, everyone. Let's discuss our financial results for 9 months of 2018 in details.Slide #7 shows our financial results by segment. Both the operations remain our key segment as usual. And during the 9 months, it generated the majority of total revenue about 85% -- 84% and 2/3 of company EBITDA. Grain segment generated 7% of total revenue on third-party sales but has a significant share in company's EBITDA. It is about 35% due to extremely strong harvest we gathered this year. As you know, the majority of grain we produce are for internal consumption, including sunflower seed and soya as well as the lion's share of corn. Our third and smallest business segment is our -- is the agriculture operations. It generated about 9% of total revenue and contributed 4% to consolidated EBITDA. This segment is mainly represented by meat processing and convenient food production. Our export operation grew significantly during the 9 months 2018 and resulted in USD 660 million of export revenue or 58% of total consolidated revenue.It actually 18% higher year-on-year mostly due to the higher volume and price of chicken export. Let's look at each business segment in details.Slide #8, poultry segment performance. During the 9 months, we increased poultry production volume by 8%. There are 2 drivers for growth, totally, it is due to the expansion of Vinnytsia poultry farm; secondly, driven by increasing average weight per head of chicken produced at the Myronivka poultry farm. Currently, there are 3 new brigades for growing chicken operating at the Vinnytsia complex. In 2019, accordingly to the expansion plan, additional 3 brigades will be commissioned to continue our production growth.Revenue in poultry operation increased by approximately 20% year-on-year, driven by chicken meat sales volume growth and higher price. Growth in revenue was mostly achieved owing to our export growth strategy, which is focused on marketing targeting. We continue to route each product to its most saleable markets, which is result -- which has resulted in 22% of growth of export volume and 13% growth in export prices, especially on MENA region and European Union.In general, during the 9 months in 2018, our average sales price, includes Ukrainian price, increased by 16% in hryvnia terms. Average poultry production cost during the 9 months increased by around 20% in hryvnia terms year-on-year, reflecting higher price of order components, protein -- including mostly the protein as well as higher overall barrel cost. This increase was completely in our -- in -- completely in line with our budget for 2018.Gross profit of poultry segment -- profit increased by 3%, while at the same time, EBITDA decreased by 13%, reflecting mostly change in government grant because you remember, last year, in 9 months, we received a $41 million government grant. Adjusted EBITDA for the 31 (sic) [ 41 ] standard effect per 1 kilo in 9 months was $0.54 per kilo.Let's move to the next Slide #9. We did very an impressive higher harvest in 2018, about 2.6 million tonne in total. Accordingly to our preliminary estimate, which is 30% higher compared to the previous year -- previous result in 2017, mainly due to the recorded yield of corn higher than 10 tonne is approximately 10.7 tonne per hectare net weight. Revenue of grain segment, external sales only, totaled $85 million, the same as last year. After shorter period of positive dynamic during the summer, market price for crops decreased to the previous low level. Logically, we decreased our previous assumption -- previous forecast of EBITDA per 1 hectare from $400 to $340, which we expect today we will receive in 2018. But anyway, we reached still by 30% higher compared to the EBITDA per hectare in 2017. That is why, in 9 months 2018, adjusted EBITDA of grain segment increased by 30% year-on-year.Let's go to the Slide #10, other agricultural segment where, as you know, the key businesses are meat processing and convenient food production. Since our investment [ match ], we are going to launch the new production line for chicken frankfurts soon. This expansion will allow us to increase sales volume using the raw materials from Vinnytsia Phase 2 and help us to support our leading position in meat processing industry in Ukraine, where consumer request product at affordable price. In 9 months, revenue of other agricultural segment increased by 14% mostly due to price growth by [ 30 ]% for meat processing product.EBITDA of segment remained relatively stable compared to 2017, with EBITDA margin around 14%.If you [ would read ] about our cash flow and liquidity position, go to the Slide #11. Net cash generated from operating activity before working capital was $242 million, the same as in 2017. Investment in working capital was $45 million, mostly related to crops in fields. Total CapEx for the 9 months of 2018 is amount $216 million, and it is twice higher than 9 months last year due to intensive investment in Vinnytsia complex Phase 2. And debt of the period, the company total debt was $1.3 billion and net debt, almost $1.2 billion.Around 90% of total debt is long-term facility, about 88% of which is Eurobond. Our average weight interest rate currently is around 7%. In terms of liquidity, at the end of the 9 months, we had around $180 million in cash, mostly in dollars. Net debt-to-EBITDA ratio was 2.6 versus receivable covenant ratio 3x net debt to EBITDA. Our currency balance remains strongly positive. And now I give the floor to Anastasiya to give you our current business update and outlook.
Thank you, Viktoria. To conclude the presentation, let me provide you with the business outlook for 2018. First of all, MHP proceeds with the CapEx plans and finalize in terms of expansion of the Vinnytsia poultry complex. This year, MHP plans to produce around 630,000 tonnes of chicken meat, which is 10% more than last year as a result of a new production capacity, which came on stream, our Phase 2 launch and a less share of thinning at the Myronivka poultry farm, so we have 2 drivers here. Company's actual sales of chicken meat are expected to be around 280,000 tonnes, which is a little bit over 25% growth year-on-year, mainly due to the increased sales to the MENA and the EU regions.Taking into account strong harvest of both spring, especially corn and soya, and winter crops, we expect stronger financial results of MHP's Grain Growing operations in 2018 compared to 2017.We continue to invest into innovations, and our biogas station of 12-megawatt capacity has just recently been launched in operations. And at the beginning of 2019, we expect to receive first biogas.As you know, at the end of September 2018, MHP announced its intention to acquire Perutnina Ptuj, a leading poultry and meat processing company in the Balkans. MHP expects to complete this transaction by the end of this year. This way, the company is undertaking a new strategic step, build a platform and start its expansion in the EU, which will add value to the company and strengthen its position as a global player, while Perutnina Ptuj will benefit from a long-term strategic investor. When the deal is finalized, MHP is ready to invest into Perutnina Ptuj's assets to improve the efficiency of operations to support and expand its product and of course, strong brands. We are confident that we will continue to deliver strong financial result, supported by significant and growing share of hard currency revenues from exports of chicken, oil and grain.We are now open for question session. [Operator Instructions] Thank you for cooperation. Karina?
[Operator Instructions] Our first question comes from Andrew Howell, Citi.
So 3 quick questions from me. First one is just on finance costs, which have been up quite significantly this year, and obviously, there are some one-off refinancing expenses that were part of that cost, but I'm wondering, looking to next year, do you have any guidance on kind of where finance cost -- would that go back to sort of $85 million range where -- well, that's for the 9-month period, but -- in 2017. Let's just say, will it go back to 2017 levels? Or is there some other factors that would keep that elevated looking into next year? Second question is just on EBITDA per kilo. Also get curious on sort of the guidance. Now that those subsidies are out, is the type of margin we're seeing now, so $0.50, $0.55 per kilo, is that, in your view, representative of what we would expect also looking forward into next year? Or are there some one-offs that are maybe suppressing that this year? And third question is about the acquisition. You haven't said much about it, in particular, what type of the size of purchase price we're looking at and the terms of that and timing as well. It'd be very useful to know.
Okay, thank you for your questions. I'll answer them question by question. First of all, you're completely right, we include in our interest financial cost one-off payment, which we repaid during the [ our ] transaction, we set changed maturity of existing Eurobond. And regarding next year, our expectation is that we will have our interest cost around $100 million, yes, because average rate, we have around 7%. Regarding the second your question about EBITDA per 1 kilo of chicken meat, yes. This year, we will have $0.54. Our expectation for next year, maybe it will be around $0.5, yes. And the third question regarding the acquisition. Yes. Unfortunately, we cannot say exactly our -- the price on this company. But anyway, even we -- if this transaction happens until this year, if we can complete this transaction until this year. Anyway, we understand that we will be completely with our covenant -- completely in line with our covenants. We suppose that by the end of this year, our covenant net debt to EBITDA, if, I would like to emphasize, if this transaction happens, yes, we will have around 2.9, 2.95, net debt to EBITDA.
But is there some -- is equity consideration part of the plan? You would be issuing shares to pay for this?
No, no, no. We have cash -- no, no, we have enough cash and [ part ] that we have on -- in drawing the credit line.
Understood. And maybe just finally, I mean, can you talk a little bit more about the strategy -- the strategic goal of this company? How it would fit in? Is this something which you will be acquiring brand that would kind of become core to MHP? Or do you plan on putting your own brand into those channels? And kind of how that sits with the broader company?
No, No. First of all, we -- yes, we see a lot of potential for growth in that company, in Perutnina Ptuj. Yes, Perutnina Ptuj has a very strong brand. And today, Perutnina Ptuj produce more than 40% of total volume is value-added product. And we see how due to our investment, we can increase -- we can provide growth of this company, yes. And yes, it should be completely different, and we see the potential for growth of this company. From one hand, we can see how we can increase and provide growth to this company, and from other hand, we understand how we can improve efficiency of this company. It's completely different issue for us. We would like to develop this company, and separately, we continue to increase capacity. Our capacity increase -- our poultry capacity in the Ukraine and it will increase our sales volume for export and in Ukraine. It's completely 2 different part of our strategy.
Our following question comes from [ Vistis Anboa ], Barings.
Just a follow-up on the acquisition. I just wanted to confirm that you don't intend to issue bonds to pay for this acquisition? And then also, there've been headlines that you plan to spend EUR 200 million on investments, on this acquisition in next 5 to 7 years. Can you confirm that? And then my second question is to do with poultry prices. Can you -- because you've downgraded your EBITDA guidance for the year, can you just briefly talk about the global outlook of poultry prices, the outlook for poultry prices in Ukraine and then the kind of prices that you're seeing -- poultry prices that you're seeing with your exports? And then finally, last question, there's been an increase in short-term debt. Is that seasonal? Or should we expect that amount of short-term debt to remain?
Yes, I will try to ask for your question, question by question. Maybe I will sometimes omit, but you help me. First of all, you're completely right. We hear the -- we have strategy to provide investment in this company during the 5, 7 years is around $200 million. But it's the investment for Perutnina not just for 1 year, it is a long-term strategy. The second question about global chicken price, yes. Today, to be honest, if you look at the price in current -- global chicken price, it is not as high, is a low level. And we don't -- maybe, we always try to be very conservative. And that is why we put in our forecast and especially in our budget for next year, the current price, which is not high, is a very low level. And what we have and what, I suppose, is very important for us, maybe you know that we are exporting our chicken meat, not in one region. We're exporting today in more than 60 countries. And we have some flexibility, not so significant, but anyway, we have, yes. And we can decrease some volume from one region and increase some other region. Not the -- completely refuse to such product from one region, but anyway, we have flexibility. That is why we feel very comfortable with -- and we put in our budget for next year our current price, which you have today. Yes, if price isn't -- if price is higher, it will be bring to us more benefit, yes. But anyway, at the moment, I don't think that price can be significantly lower. Maybe, slightly decreased, yes, why not, yes, it's very realistic, but not significantly lower. Because if you look -- yes, if you look at what is the profitability on different big poultry producer in the world, you can see that I cannot imagine how price significantly -- how price can significantly decrease with whole -- with the whole profitability of our competitors in the world. And the second issue about -- and the same situation in Ukraine. We don't expect -- yes, we put in our forecast that very, very insignificant increase in price, just few percent. Yes, just few percent.
Okay, and can you confirm that...
We will try to do more -- yes, we will try to do more, but anyway, we put in forecast. And when I talked about that we suppose that our EBITDA per kilo will be $0.5, around this figure. Yes, we include in our budget increased price in Ukraine for next year, just few percent.
Okay. And just going back to the acquisition, can you just confirm that you don't plan to return to the bond market to fund that acquisition?
Return bond market, not -- no, not in near future, because the situation in financial market and especially in bond market is not very interesting, yes, especially even for our company. Yes, we understand how we can finance this acquisition, and we have enough capacity and capability to provide this acquisition. And we understand how we provide our investment in this company, too, during the next 5 years, because here, you understand that with our huge intensive program if -- in Ukraine for increase in [ call ] growing our poultry capacity, we will generate big positive cash flow. Regarding our short-term debt. As I told you in our presentation, today, we have just 10% of our total debt is short-term debt, is a very small amount, around $100 million. At the same time, our average level for short-term debt, especially for financing working capital comfortable for us around $250 million. That is why we have rumors (sic) [ room ] for increasing short-term debt.
Room.
Room. Yes, sorry, room for increasing short-term debt. But anyway, we assume that our -- anyway, we understand that is -- and in company, we have very strict goals that at minimum 80% of total our debt must be long-term debt.
[Operator Instructions] Our next question comes from Stella Cridge, Barclays.
I have a couple of questions, maybe I can ask them in turn. The first one is on the cost side. So you did mention in your comments that there was this increase in hryvnia terms in cost year-on-year. And -- but I thought that there was a particular jump within the third quarter, quarter-on-quarter. So just wondering if you can give a little bit of extra info as to why there was that particular jump. That'd be great.
Yes. First of all, yes, during the 9 months, our costs of production of chicken meat higher than the same period past year. Yes, you're completely right. In the third quarter, there would be the difference slightly higher because protein -- the cost of protein from sunflower protein in the third quarter in 2008 (sic) [ 2018 ], higher than protein in the same period last year is the main reason for increase in [ cost in so ] 3rd quarter protein.
But does that stand on a quarter-on-quarter basis as well when you compare with Q2?
Yes, and the quarter of Quarter 2. Yes, one is increase in the protein, yes.
Okay, okay. Super. And on the CapEx, could you just confirm what the final CapEx for 2018 will be? And what you have planned for 2019 in total, I mean, I guess, sort of, either with or without the acquisition?
No, no, no. I talked about CapEx for 9 months. This figure -- this number does not include acquisition because we will provide the acquisition -- yes, you need to -- our CapEx-- your question about our CapEx for 2019?
Yes, yes.
Yes, we suppose that our Capex -- your question about CapEx not 2018, 2019, yes?
Well, both of them as well, to just confirm what you're going to spend in the final quarter of this year, [ is all ].
First of all, you understand our CapEx, our investment in 2018, it depends on we will provide the transaction this year or next year. Yes, I will tell you without acquisition, our total CapEx for 2018, $250 million. $250 million, $260 million without acquisition. Our CapEx for next year, yes, result, yes, it will be better if I tell you without acquisition, because I cannot tell you the amount of acquisition right now, yes, price of this company. Our CapEx for next year without acquisition, around $250 million. Without acquisition and without investment, new investment, in this company.
Okay. So that's fantastic. And then the final question was just a follow-on for the previous one. So just in terms of this short-term debt that you have too -- in the next 12 months, could you just give us a breakdown as to what that is and what the refinancing plan is overall?
Refinancing plan for short-term debt, now first of all, yes, the short of -- the biggest part of short-term debt is the PXF, which we usually attract, yes, attract during the harvesting time for purchasing sunflower seed. And usually, we repay this PXF during the first half of the next year. And just you have short-term debt for financial working capital during the year around $50 million, $80 million, which is a short-term debt which we always prolongate, and we have a lot of undrawn line. That is why I don't see any problem for this.
Our next question comes from Andrew Perederey, Concorde Capital.
And I had a question regarding to government grants. You said in your 9 months results that you received about $6 million, $7 million of government grants as a compensation program. And also, I see that in the fourth quarter, you could receive about $20 million of government grants as a compensation. Could you please comment how you to deduct it from the assets or how you should do show it in your financial results?
You can see this amount in our cash flow, yes? Yes, we -- you can see this amount. Because you know, this government grant is a compensation for our investment, for our CapEx. That is why we don't include this government grant and we cannot include a government grant in our P&L, yes, just include in cash flow [ can show cash flow in ] part of investment, yes, investment.
Yes. And should we expect this $20 million government grant in first quarter of 2018?
No -- why expect? And we received, yes. We received $20 million. You know that we received $20 million, [ $600 million ] agreement in the first quarter, yes, we received last month. Andriy, your question was about how we received?
And this program is -- will be in the future -- is also into 2018 ( sic) [ 2019 ] or the government could change something?
In '19, yes? Your question is about '19?
About the future, about the -- yes.
Yes. No, it is not question for us about the government program, yes, yes. You need to, yes -- we will see after -- yes, we will see. I cannot tell you that. We'll -- our government will -- we'll continue this program or not continue is not a question to company, yes.
A foreign question comes from Alexey Ilin, Franklin Templeton.
Just a quick question on potential acquisition. What's the -- does the company consider paying dividends in case of this acquisition next year or not?
Very good question. Yes, we have dividend policy, yes. And so we will decide pay or not pay. But we would like to be...
Sustainable.
Sustainable, yes. And -- but anyway, we will decide to -- after the financial result in the first half -- in the first quarter next year.
Okay. And one more question to clarify. You mentioned to my former colleague that your CapEx for 2018 is expected to be $150 million, $160 million. But were you referring to the fourth quarter or to the full year? Because actually, based on your presentation, you have already spent the $200 million.
No, no, no. It will -- the CapEx. No, no, no, it's -- no, no, no. I mean, the -- no, no, no. I told -- yes, I told our CapEx, $150 million, $160 million or $170 million for 2019 without any acquisition and without investment in new acquisition, no. Our total -- our CapEx without any acquisition for 2018, $250 million because only in the 9 months, we spent more than $200 million. $210 million it is, yes.
And what will be the key, I would say, CapEx item for the next year? It's the finalization of the Vinnytsia 2 project or something else?
No, no, no, we -- finalization, yes, we will continue, because you understand the total -- our CapEx and our capacity for Vinnytsia Phase 2 includes 12 brigades. Until today, we launched only 3 brigades. During the next year, we will launch additional 4 brigades. And even, we will spend for Vinnytsia project, not money only in 2018. Even we will spend for Vinnytsia project money in 2020. Because as you understand, we gradually increased capacity because the total capacity and total volume which we produce in Phase 2, 250,000 tonne of chicken meat. And during the -- this year, we'll slightly increase. Next year, we will increase our production volume by 100,000 tonnes. And during the next 3 years, we will increase our production volume. And that is why we will invest money for Phase 2 Vinnytsia.
Our next question comes from Alex Krivoshapko, Prosperity.
A question. Can you please clarify in a bit more details about Perutnina, their assets? Kind of what's their production capacity? How much they produced? It's just for us to better understand the size of the business. Okay, this is my first question. And secondly, what are your expectations for kind of working capital changes for full year '18, kind of given the -- what has happened with prices for the sunflower and what have you. And I guess my last one is, can you help us quantify the buildup in portfolio financials for 2019? Because from what I understand, it will be operational from early '19.
Yes, thank you for the question. I will start with question #3 about the -- yes. Yes, you're completely right. By the end of this year, we will launch the third stage of our brigade project in Vinnytsia. Yes, CapEx for the first stage was approximately $20 million. The capacity, 10 -- 12 kilowatt, yes.
Megawatt.
Oh, sorry, megawatt. Sorry, megawatt. Yes, 12 megawatt. Regarding the second question about working capital, yes, you're completely right. Prices of sunflower seeds now is slightly lower than our previous expectation. And that is why we expect that our total investment in working capital will be around $50 million, $60 million. And regarding the first question regarding the size of Perutnina Ptuj, Perutnina Ptuj produced and sells around 80,000, 90,000 tonne of chicken meat per year in gross value-added product. Revenue of company, approximately EUR 250 million. This company has a production facility in 4 countries, Balkan region. And -- but the company provides sales and expert in different -- in more than 10 different European countries.
Does the company have -- and you said ...
The company has some debt. The company -- yes, company has some debt but not significant.
And how profitable is the business?
How profitable we are.
The company, yes, it seems to me if you look at financial report, yes, the company generates -- no, it seems to me one of the -- no, okay, around 10% EBITDA margin.
EBITDA , yes.
yes.
And when you kind of approved this transaction at the board level, what sort of payback period are you looking for outside of Ukraine? When you look at this acquisition, what kind of payback period are you looking for, for MHP? I understand that you may invest EUR 200 million in 5 years to modernize capacity. But if you look at the acquisition price and compare it with how much you'll get in return, what is your internal rate of return on this potential acquisition?
Yes, it's very good question. Thank you for your question, yes. You understand -- yes, we understand that it's a European company, yes. And first of all, we can use -- or we understand that IRR of this investment, it will be lower than IRR of investment in Ukraine. But anyway, it's our long-term strategy, and we understand that this acquisition just first step for our expansion for Europe. And what is a very important issue, Alexey, we see how we can improve efficiency and how we can increase profitability of this company, not just we see potential for growth, volume and sales. And so we understand how we can increase EBITDA margin. Yes, we completely -- we recognize that we cannot achieve in any European company the same level of profitability that we have in Ukraine. But at the same time, we bought Perutnina Ptuj with very strong brand. And what is very interesting for us, 40% of total revenue -- and more than 40%, even 60% -- 40% of volume and 60% of total revenue is the revenue from value-added product. And this is why we see potential for growth. And yes, we understand that IRR of this acquisition, it will be not the same in Ukraine, not 22% or 20%, but it is digital, yes. [ how much ]...
Two digit.
Double digit.
Yes, 2-digit figures.
Double-digit kind of...
Yes. Even around -- it seems to me around 15%, 17%.
Taking into account your future potential improvements or looking it on a stand-alone basis, when you say the 15%, 17%, is it your acquisition price versus how much it currently generates? Or is it acquisition price plus your investments? Is this how much you will be making in the future?
Improvements.
No, yes, investment but plus improvement because we cannot provide huge -- yes, we cannot provide even without investment some improvements. Yes, we understand how we can do it. But if we would like to provide growth to company, yes and significant improvements, we need to invest. But at the same time, company generate EBITDA per year. If you calculate how much company generate every year and multiply it by 5, believe me, it will be not small amount.
And so when you did say that you plan to invest EUR 200 million in the next 5 years into the company, does it include the money which the company generates itself? Or is it something which -- in which we would have to put on top?
No, it is just money, yes. And to do, yes, to do, Alexey, I cannot provide more information because...
Not complete.
Yes, transition unfortunately is not complete.
[Operator Instructions] We have a follow-up question from Stella Cridge, Barclays.
I actually wanted to ask you about the farming segment. So if we maybe fast forward to after the elections next year, I guess it's possible that land reform can come back on the agenda. So I was wondering, I mean, what's the strategy as it stands right now for MHP with regards to land in Ukraine? I know you said in the past you may be interested in expanding the land bank. Is that something you might do in the near term? And then from a financial perspective, I mean, you said that if this acquisition goes ahead, your net leverage will probably trend up towards $300 million. Now how do you think about preparing for the land reform financially to kind of allow yourself the flexibility to go ahead with that if you needed to? Any comments there would be great.
Yes, thank you for your very good question. Yes, you're completely right in that, yes, Ukraine -- in Ukraine we will have 2 elections, President and Parliament election. But Parliament election will be held -- or will be happened by the end of the year in October. To be honest, I don't expect any evolution changes in the law next year. But maybe, it will be happen in 2020. We will see. First of all, as I told previously a lot of times, that even land reform happen tomorrow, I'm sure that maybe maximum 25% of citizens who are today's owners of the land will be ready to sell immediately, yes? Because for a lot of people, especially people who live in the village, land is their assets, and I do not -- we don't expect that these people are ready to sell immediately. At the same time, we feel -- look at our CapEx, especially Vinnytsia. I told previously that we have accordingly our current plan, we understand how we provide our building and how provide the construction brigades by -- part by part. And we are very flexible. And we can -- for example, yes, our minimum CapEx for 2018, only $70 million. If something happened, if -- or if we would like to invest in land, and we have to invest in land, we can...
Postpone.
Yes, we can postpone investments in the second stage of Vinnytsia, and so we can keep $80 million and we can invest $80 million for land, for example, for acquisition of the land.
We have no other questions. Dear speakers, back to you for the conclusion.
Thank you very much for the call. In case you have your further questions, of course we're here to help you with answers. So please email us and we will be more than happy to answer them. And of course, if you'd like to have a separate conference call, please drop me a line and we will easily organize it either with me or with Viktoria. Thank you very much, and have a lovely day. Bye-bye.
Ladies and gentlemen, thank you for participating. You may now disconnect.